Speech by Commissioner Christos Papoutsis, Responsible for Enterprise Policy at the First Meeting of the Task Force

Breydel, Brussels, 28 October 1997

Chairman, Ladies and Gentlemen

I would like to welcome you all, personally, to the European Commission in Brussels. I am very sorry, that I was not able to be with you at lunch, but I know that you were in very good hands.

I would like to begin, by thanking most sincerely, Professor Chris Evans for undertaking the role of Chairman, particularly in view of his busy schedule and business commitments.

For those who don't know Professor Chris Evans, he is one of Europe's leading biotechnology entrepreneurs and founder of a seed capital investment company. He has significant achievements as a scientist and extraordinary achievements as a businessman. He is also a member of the UK Trade and Industry's Group on competitiveness. And this fits very well, with the mandate and objectives for the BEST Task Force. I am fully confident, that he will work with the same entrepreneurial flair for the Group, to achieve best results.

And I would like to say, that I am extremely grateful to all of you, who have accepted my invitation to be part of BEST. I recognize, that you have given up important time to undertake a demanding European venture. But, I can assure you, it is an important task.

The challenges that European enterprises are facing today, are directly related to the business environment. They require closer examination to see, what and how improvements can be made. A new initiative was therefore necessary, on business environment simplification, in order to examine all factors, which prevent enterprises from growing and creating jobs. The BEST was established, to contribute to this need. The main challenges ahead of us, are five :

To reduce the burden of a complex legal, fiscal and administrative environment, which falls heavily on SMEs;

To secure access to bank and risk finance;

To overcome weaknesses in management capabilities and improve access to training;

As you well know, there are 18 million unemployed people today in the European Union. Politically and socially this is clearly not acceptable,. It is clear that the European Union and the Member States have to face this dramatic situation in an efficient and coordinated manner.

The Heads of State and Government in Amsterdam, decided to hold a special European Council, an Employment Summit, on 20 - 21 November in Luxembourg.

Unemployment is for us, the number one problem of the Union. Growth and the creation of jobs is our number one priority.

We have of course to examine the general economic developments. It seems, that we should not be too pessimistic about the future. Latest estimates from the Commission's statistical department, EUROSTAT, indicate that there is an increase in economic activity in the European Union, and, an upturn in growth. This growth is not entirely due to exports, but also to a general upturn, in confidence and consumption.

The major question today is, what can we do, to build on this element of growth, within the Union, and, at the same time, create more sustainable jobs?

Although the evidence is not conclusive, it appears that, while many large companies have been reducing the number of employees, the SME sector of 17 million enterprises has been increasing jobs, in net terms. I should underline that the SME sector at Community level, is defined to include enterprises, employing less than 250 employees, which have an annual turnover not exceeding 40 million ECU, and less than 25% of capital or voting rights participation, by large enterprises.

Actual data show, that enterprises with fewer than 100 employees have contributed a major part to this job creation, at a rate of 250,000 net jobs per year, over the period 1988 to 1995.

This suggests, that small businesses have the potential for growth and employment. It is this crucial relationship between SMEs and employment potential, which the European Commission has underlined over the past years. And I am happy, that the political leaders in the Union have increasingly come to recognize this fact.

This issue is now high on the political agenda. At the same Amsterdam European Council, Heads of State and Government, also confirmed, their strong commitment to reducing the burden on European businesses, so that they could realize their employment potential.

There is a need, to simplify and reduce, legal and administrative regulations and procedures. The first thing to note is, that the Commission is already engaged in specific actions, aimed at simplifying existing legislation, as for example the SLIM project on a sectoral basis. The European Council does not wish to see such work duplicated.

In the Commission, we saw the European Council's invitation to set up a Task Force to consider these issues, as a strategic and motivating activity. This was an invitation which I gladly accepted.

In setting up this Task Force, I was concerned to ensure the right mix between entrepreneurs, who have hands on experience of running a business, and representatives of the public administration, who have experience both in working together with business, and in the legal and administration environment that they operate.

Ladies and Gentlemen,

You have a big challenge before you. Because of the need to introduce practical measures to reduce unemployment levels, there are pressures to produce results in a very short time.

I am sure, that under Professor Chris Evans's chairmanship, you will have your own ideas about the objectives of BEST, and the issues that you consider important to be examined.

That said, I hope that you will have the opportunity to look at the wider aspects of the business environment, and at the different national approaches in the Member States.

In practice, there are different ways that public administrations interact, with entrepreneurs and business. There are, for example, different ways that public administrations help over, access to finance.

We are currently intensifying our efforts in the preparation of a Directive to help reduce the late payment problems in commercial transactions by both the private and public sector.

An important step towards improving access to bank borrowing, was to organize a Round Table of Bankers and SME organisations. The results of this work have shown that the Round Table created new possibilities for improving the relationship between the two sides concerned, and for developing initiatives, which could improve access to bank financing.

And I am happy to say, that next week at the Commission, I will present a proposal for a new financial instrument concerning transnational Joint European Ventures, the JEV. JEV will provide support for the creation of cross-border joint ventures by SMEs operating within the European Union.

You probably know, that we are trying to stimulate further, the development of secondary capital markets for growing companies. The Commission was instrumental in helping to set up EASDAQ, the European answer to NASDAQ.

But we need to recognize, that this will not change the business climate overnight. NASDAQ has been around for many years, and operates in a business environment, which is more conducive to risk taking. EASDAQ is not a year old yet. But the initial experience is encouraging. We also need to think of those enterprises which are not of high technology or fast growing activities.

There are a lot of entrepreneurs who are good at providing services. Like business services, window cleaning, or office maintenance. They will need, as they grow, help with finance, probably working capital, rather than equity finance for research and development. They will also need help, when trying to take on, extra employees.

These new employees are not scientists or engineers, but low skilled employees. However, any employer taking on extra staff, faces new barriers, extra taxes or administrative burdens.

I would also like to take the opportunity to underline the importance of bringing the social economy sector into the mainstream of the economy. I am referring to cooperatives, mutuals and associations. I should underline the growing importance of this sector, as part of our enterprise culture and as a potential job provider. I would like to point out, that cooperatives in the European Union have 60 million members, the mutuals employ more than 200.000 people, and only in France one in seven employees works in an association.

I would welcome any experiences on obstacles inhibiting the creation and growth of social economy activities, and elaborating, possible solutions towards reducing administrative burdens for the sector.

The tourism sector is one of the main providors of jobs, with a significant employment potential. Its development, if implemented in a sustainable way, also provides longterm benefits to the economy. Tourism is directly linked to a complex network of SMEs, engaged in the provision of accomodation, food and drink, transport facilities and services, as well as entertainment for the tourist.

I would like to remind you that tourism contributes 5,5% to the European GDP, 6% to the employement and 30% to the external service trade of the European Union. For example, only the hotel/restaurant/cafeteria sector accounts for 1,3 million enterprises and 5,3 million employees, a contribution of 5,2% of the total employment.

The adaptation of the sector to the new environment requires closer examination of the legal and administrative barriers.

We have also placed a priority, on the introduction of electronic commerce. I believe, that electronic commerce in Europe, offers us an opporutnity, to integrate all our companies into the single market, and also to be able to compete in the global market. Ensuring the elimination of legal and technical barriers, is a major issue for business users and specifically for SMEs facing the challenge of globalization.

With the introduction of the single currency on 1 January 1999, the reduction in exchange rate uncertainty, and associated administrative costs, and the cost of borrowing, will stimulate trans-border business. But, enterprises have to face the challenge of timely adjustment.

There are also different ways that national administrations deal with access to the application of research, to technology transfer and the development of innovation. There are different ideas about how to help small businesses, training schemes, for both management and employees, at reasonable cost. We need, I think, to be flexible in our approach.

It is in these areas, that I hope BEST can make a contribution. In order to smooth the way for entrepreneurs and small businesses, so that they can concentrate on growth, and on improving their competitiveness.

We have, in the Commission, been thinking about these issues very seriously, and will be putting forward some of our ideas at the Employment Summit on 20 and 21 November in Luxembourg.

Indeed, in view of the link between job creation, and the areas that BEST will examine, I hope very much that BEST itself will be able to contribute to the Employment Summit.

A brief interim report to the European Council , with some preliminary ideas, about what you think the problems are, and how you propose to work, would be most valuable. We have committed ourselves to come up with concrete proposals, and President Santer will present the Commission's view to the Heads of State and Government.

Looking further ahead, I hope that you can accept the tough target to produce a final Report for the Cardiff European Council in June 1998.

This means that you should finalise your work towards the middle of April next year, in order that the Commission has an opportunity to consider your Report, and make its own recommendations.

You have seen the Commission's contribution to this Employment Summit. This paper sets out some guidelines, which we think the Member States should consider as part of their employment policies.

The acceptance of entrepreneurship as a concept in its own right, is part of this process. In Europe we have to change the way we think about business and business people. I would like to see the development of a new culture regarding entrepreneurship in Europe.

I believe that we should introduce this concept in our educational system and university programmes. Today, we are facing radical changes in economic and social relations. Our educational system should not prepare our young people only to become employees. It should give them the necessary grounding to develop entrepreneurial activities.

Europe is not short of ideas or of talented engineers and scientists. We are not short of people who are capable of competing against the best in the world. We need to encourage them, rather than hinder them or try to control them. We need to offer help, advice and co-operation, rather than barriers or burdens. We need to understand the problems, which prevent them, from achieving their potential for growth and employment.

To do this, we need to be talking to business organisations and to individual businesses.

We want to know what problems and barriers business comes up against. No doubt, BEST can play a key role here. We need your personal experience and ideas as businessmen or officials closely related to business.

All these are vital issues, which need to be resolved in the Member States. I think it is clear that BEST will probably need to prioritize. We need to consider where BEST can make the most impact, and have the most influence.

Your challenge is to bring forward new and radical ideas. I hope you will be bold and innovative in your proposals, perhaps even provocative. In this way you will contribute to improving the business environment and competitiveness, and, enhance employment in Europe.

I shall follow the work of BEST closely. I look forward to meeting you all again at the Milan Conference next month, which Ministers from many Member States will attend. This important Conference will provide a good opportunity to mix with others, both entrepreneurs and officials.

This Conference, with its theme of employment through innovation, will act as the starting point for new policy strategies, particularly for the crafts and small business sector. It will highlight the importance of developing entrepreneurship and an enterprise culture throughout the European Union.

Chairman, Ladies and Gentlemen,

I hope that you have a very constructive meeting today. My services, the secretariat of BEST, will provide the necessary support, so you can carry out your tasks as smoothly and effectively as possible.

At this point I have to leave you. It gives me great pleasure to hand over the microphone to Professor Chris Evans, your Chairman, to start you on your way.